The chapter investigates the roles of policy dfiffusion and policy learning in shaping the design of California's cap and trade system. On the surface it is very similar to other cap and trade programs, but in practice many detailed differences reflect efforts by California's policy-makers to to avoid flaws they saw in other trading regimes, such as the EU ETS and the US East Coast's Regional Greenhouse Gas Initiative. We also discuss the lessons for other trading systems. California's cap-and trade system has developed mostly on its own, special political context. This reduces the 'lessons learned' for other trading systems and also hampers the feasibility of cross-border trading.